John Murphy (Lowe, Australian Labor Party, Parliamentary Secretary to the Minister for Trade) Share this | Hansard source

With great respect to the member for Groom, my friend and political opponent, I condemn the obfuscation and sophistry that he has just delivered in this chamber in relation to the Howard government’s position on the EMDG Scheme. I also condemn his misrepresentation of the Minister for Trade, Simon Crean, in relation to his position on the EMDG Scheme and on the other trade issues that the member for Groom alluded to in the disgraceful contribution he just made in this chamber. I will go into the reasons for that with some sobering information on the appalling performance by the Howard government in relation to trade in Australia. For the last six years there has been a trade deficit every month, and the Howard government did absolutely nothing about it. As a government, they stand condemned.

Instead of capitalising on the once-in-a-lifetime opportunity of the resources boom, the then government went belly up in relation to trade. In the last six years, total export revenues grew at an average annual rate of only 5.8 per cent, compared with 10.7 per cent in the 18 years following the float of the dollar by the Hawke government in 1983. Services exports grew at around one-third of their long-term average, despite being a major component of the domestic economy. Goods exports grew at an average annual rate of 6.4 per cent, compared with an average annual growth of 10.3 per cent since 1983. The manufacturing sector collapsed under the Howard government.

One could charitably describe these trade performance indicators as disappointing. The truth is that Australia’s trade performance over the past decade has been appalling. The Howard government has bequeathed the Rudd government 72 consecutive monthly trade deficits. The trade deficit for the September quarter 2007—listen to this—was a record $6.9 billion. The member for Groom should be here to listen to that. For a government that would so often and so arrogantly spruik its economic credentials, these figures are indeed damning. A government seeking to ensure or secure Australia’s future economic position beyond the resources boom must offer more than the mere rhetoric that we have just listened to from the member for Groom. It must engage in areas of opportunity. The need to renew our focus on trade performance takes on a heightened sense of importance in the light of the fact that, over the past five years, world trade has grown at twice the rate of world output. Australia must do better on the trade front. Australia must take advantage of the global opportunities presented to it.

Clearly, the Howard government failed to see the opportunities, failed to take advantage of the opportunities and dropped the ball on trade. Far from being responsible managers of the economy, the Howard government presided over an environment where net exports made a positive contribution to economic growth in only two of the 12 years that they were in power, despite world trade growing at twice the rate of world output. The failure of the previous government to integrate trade and economic policy has contributed to one of Australia’s worst trade performances in history and they cannot run away from that.

So it goes without saying that fresh ideas and a new direction in trade policy are long overdue; hence the Mortimer review. Australia has to get back to a position where net exports are making a positive contribution to economic growth. It will not be easy, but the Rudd government will not be content with leaving its head in the sand like the previous government. Rather than belatedly reacting to challenges, the Rudd government is committed to proactive reform.

There are serious problems that deserve a serious commitment to find solutions. The introduction of the Export Market Development Grants Amendment Bill 2008 is a down payment on the government’s commitment to find solutions to the soaring trade deficit. The commitment does not end there. Simon Crean has hit the ground running on a range of policy responses, and it would be prudent to outline some of those for the benefit of the member for Groom in order to put this bill into context. The Minister for Trade has already recalibrated Australia’s approach to trade negotiations by boldly trying to breathe life into the Doha Round. He is right to say that trade opportunities would be endless if the Doha Round were actually concluded, particularly given that world trade has already doubled the rate of world output, even without a successful Doha outcome. So, rather than having an unflinching obsession with free trade agreements that undermine rather than strengthen multilateral outcomes, as we saw under the Howard government, the Rudd government recognises that the best opportunities are presented through the Doha Round. Bilateral agreements should no longer be seen in isolation but must be compatible with and enhance and support the multilateral decision making.

However, there is little point pursuing improved market access globally if Australian companies are not productive or competitive enough to take up new opportunities. Australia has lacked a whole-of-government approach to increasing export levels and has failed dismally to invest in the drivers of economic growth, such as skills, innovation, information technology and infrastructure. It has only been months since the election of the Labor government but, as we have seen in the budget, the Rudd government is proactively addressing some of the productivity reasons underpinning Australia’s poor export performance. That is why we have committed to Infrastructure Australia, to a national broadband network, to an education revolution, to skilling Australia and to a $200 million Enterprise Connect innovation and research system. In clear contrast to the previous government, the Rudd government will take a twin-pillar approach to trade policy for sustainable economic growth. Multilateral trade liberalisation will be pursued at the border, while economic trade and structural reform will take place behind the border. The minister has put great emphasis on getting Australia’s trade strategy right in the future, commissioning the Mortimer review to examine all current trade policies and programs. That is appropriate, in view of the legacy left by the Howard government.

One of the programs under review is the subject of this bill. Given the sick state of the scheme—unrelated to how it was portrayed by the member for Groom—following 12 years of Howard government neglect, the Rudd government is not waiting for the Mortimer review to be completed before acting in relation to the EMDG Scheme. Like other economic policies and programs designed to assist Australia’s exports, the EMDG Scheme is yet another abandoned under the Howard government’s watch.

Since its inception by a Labor government, the EMDG Scheme has been an important component in getting businesses export ready and helping them to access new markets. Notwithstanding the significant support of the scheme by businesses, particularly mum-and-dad exporters, the scheme has been cut in half in real terms since 1995 and 1996—and that is the truth. It was cut in half by the Howard government in real terms, despite studies demonstrating that the EMDG Scheme returned an additional $12 of exports for every $1 outlaid by the government. The scheme was cut in half by the Howard government in real terms despite the significant assistance provided to thousands of small businesses across Australia.

Of 4,200 applicants under the scheme, 75 per cent employ fewer than 20 people and 81 per cent have a turnover of $5 million or less. About a third of these businesses are new to exporting. It is not hard to see why small businesses are so dependent on the scheme. They are often businesses that do not have an export culture, need to be mentored to become export ready and need the contacts in overseas markets.

Whenever there is a case of the former Howard government’s neglect of small business, I am reminded of the document published in 2004 entitled Committed to small business. In that document, the former Prime Minister extolled the virtues of small businesses and their importance to the Australian economy. He said inter alia:

The Government’s commitment to small business is undiminished. That is why we remain attuned to their needs and why we continue to respond to their concerns with practical measures.

It would seem that one practical measure was former Trade Minister Mark Vaile’s ‘ambitious goal of doubling the number of exporters’. Remarkably, the former government felt it could ‘remain attuned to small business’ needs and ‘double the number of exporters’ in Australia by halving a scheme that helped small business export. It is little wonder that the vast majority of Australians viewed the Howard government as having lost touch and it is thus not surprising that the previous government failed to meet its target of doubling exporters by almost 50 per cent. Surely, a scheme that encourages firms to spend their own money to seek out and develop overseas markets, as well as facilitates access to these markets, is worth supporting. Surely, firms that have the desire and capacity to export are firms that are worth investing in. Research has shown that firms that export pay higher wages, provide stronger growth in employment and are more profitable.

The EMDG Scheme is clearly an investment in our future. It is an investment for the future that the Rudd government is willing to make, and this bill, as I said earlier, is a down payment on that investment. The bill increases the maximum grant under the EMDG Scheme by $50,000 to $200,000, increasing the amount of reimbursement that exporters may claim. What did the member for Groom say about that? It is an explicit acknowledgement that exporters face increased marketing costs in international markets.

The bill also lifts the maximum turnover limit from $30 million to $50 million. To date, medium sized businesses have been punished for continuing to take advantage of new export opportunities and developing those export markets. We should be rewarding businesses that are making a real contribution to our balance of payments, not punishing them. This amendment will help to ensure that government support is not being cut off just as businesses start to develop sustainable export markets.

As well as addressing the legitimate needs of medium sized exporters, it is important to be mindful of the importance of this scheme to small businesses and the concerns those businesses have. In the time I have been Parliamentary Secretary to the Minister for Trade, I have had the privilege of visiting many Austrade offices around Australia and of meeting many small businesses that have benefited from the EMDG Scheme and are doing all they can to lift our export performance. One common comment has been about the onerous expenditure threshold that must be met by some businesses before they can receive a grant from the government. The current act provides for a $15,000 threshold. I have conveyed those concerns to the minister and the minister has listened to those businesses. This bill reduces the minimum expenditure threshold by $5,000 to $10,000, allowing new exporters early access to critical Austrade support when taking their first steps towards exporting. Australia’s export revenues remain biased towards a few major companies, with the top 10 per cent of exporters earning 90 per cent of export revenues. Small businesses earn only 0.9 per cent of export revenues, so early access to critical Austrade support cannot come soon enough for many small businesses.

Greater Austrade support cannot come soon enough for the services sector either. As I have mentioned, the current growth rate for services exports is only one-third of the long-term average. With services making up 80 per cent of the economy, we have to do more to make the most of our competitive advantages globally. This bill is a step in the right direction. This bill will make the EMDG Scheme more accessible for service exporters. It will replace the current list of eligible internal and external services with a new non-tourism services category that makes all services supplied to foreign residents eligible for funding unless specified in the EMDG Act regulations. Simply, this bill will replace a narrow, positive list of eligible services with a negative list, making all services eligible for assistance unless otherwise specified. This sensible change will help ensure large parts of the services sector no longer have difficulty meeting eligibility criteria originally designed for exporters of goods.

It is time for Australia’s new economy to take to the world stage, with assistance from an improved EMDG Scheme. As with any good scheme, good governance measures are essential. So it is essential to ensure that this scheme does not become a pot of gold for those who are unwilling—or unable, for that matter—to put in the effort to become successful exporters. Taxpayers, quite rightly, expect a return on their investment. Exporters will remain accountable to taxpayers by having to meet a new ‘net benefit to Australia’ test. Applicants claiming their third and later EMDG Scheme grants will be required to pass this test. The test is fair, balanced and provides new exporters with ample time to answer the question of whether, after a number of grants, they have in fact begun to export. An enhanced EMDG Scheme, coupled with good accountability measures, will deliver good outcomes for Australia. I have no doubt that the amendments in this bill will deliver.

Before concluding, it is worth observing that the changes contained within the bill are fully funded. This is in stark contrast to the changes made to the EMDG Scheme by the previous government two years ago, changes which were not referred to by the member for Groom. The previous coalition government had the temerity to respond to concerns about the scheme by tinkering with some legislative changes and without adding one single cent to the budget to ensure EMDG recipients could actually benefit from those changes.

A press release dated 21 April 2008 from the shadow minister for trade makes for fascinating reading. In it, the shadow minister states:

The coalition government was committed to ensuring the EMDG scheme delivered on its maximum potential and was responsive to the changing needs of exporters, making alterations to the program as needed.

The previous government made alterations all right. What they will not tell you is that they did not drop an extra cent into the scheme to ensure those alterations were worth more than the paper they were written on. The member for Groom made nothing of the fact that there was a $50 million shortfall in the funding for the scheme. I quote again from the shadow minister’s press release—

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